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Accounting D1 96 > Unit 3 > Flashcards

Unit 3 Flashcards

1
Q

3 primary financial statements

A

balance sheet
income statement
statement of cash flows

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2
Q

Balance Sheet

A

aka Statement of Financial Position
Assets, Liabilities, Equity
Can company pay short term liabilities (liquidity position)
Will debt structure allow long term survival (solvency)

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3
Q

Income Statement

A

aka Statement of Earnings
Annual and Quarterly Net Income
Measures performance

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4
Q

Statement of Cash Flows

A

Reports cash collected and paid in operations, investing, financing.
Annual and Quarterly reports
Measures change in cash during a time period

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5
Q

Statement of Retained Earnings

A

shows accumulated profits and losses since inception

links Income Statement and Balance Sheet

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6
Q

Form 10-K, 10-Q

A

SEC required form that contains all 3 major financial statements
Q - quarterly
K - annual, within 60 of end of fiscal year

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7
Q

EDGAR

A

resource used to access public Form 10-K filings

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8
Q

CIK

A

Central Index Key

uniquely identifies companies in the SEC online database

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9
Q

Types of assets

A

Cash
AR
Inventory
Buildings

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10
Q

Types of Liabilities

A

AP
Taxes Payable
Mortgage Payable
Unearned Revenue

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11
Q

Types of Owners Equity

A

Capital Stock
Retained Earnings
aka Shareholders Equity

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12
Q

Creditors claims against Assets

A

Liabilities

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13
Q

Owners claims against Assets

A

Owners Equity

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14
Q

Factors that increase/decrease owners equity

A

Decrease - dividends, losses

Increase - additional investments, profit

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15
Q

Classified Balance sheet

A

distinguishes between current(liquid) assets and long term (iliquid) assets.

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16
Q

types of current vs long term assets

A

cash vs land

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17
Q

types of current vs long term liabilities

A

AP vs mortgage

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18
Q

comparative financial statements

A

compare current year to previous year

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19
Q

limitations of balance sheet

A

discrepancy between balance sheet value and market value
balance sheet records purchase cost, market value uses current cost
not all assets are in balance sheet ie name recognition, distribution channels, reputation

20
Q

Shows results of operations for a period of time

A

Income Statement

21
Q

What does income statement summarize?

A

Revenues, costs to generate revenue (expenses)

Bottom line is net income/loss (revenues - expenses)

22
Q

What does income statement assess?

A

Company’s profitability.

23
Q

Revenue definition

A

Assets created through sales.

24
Q

Expenses definition

A

Assets consumed through operations to generate revenues.

25
Q

Net Income/Loss definition

A

aka earnings/profit
revenues - expenses
R>E = net income
R

26
Q

Difference between revenue and net income

A

revenue is gross

net income is net after expenses

27
Q

Gross Profit(Margin) formula, meaning

A

Sales - Cost of Goods Sold

higher GM means higher stock market price multiples

28
Q

Operating Income

A

Gross Profit - Operating Expenses

29
Q

Net Income formula

A

Operating Income - interest and tax expenses

30
Q

Non operating expenses

A

Interest

Income tax

31
Q

EPS equation, meaning

A

Earnings(Loss) per Share

Net Income/Number of Stock Shares

32
Q

gain/loss

A

Money made/loss outside normal business activities

33
Q

retained earnings formula

A

old RE + Net Income-Dividends

34
Q

Statement of Cash Flows description

A

shows operating, investing, and financing cash inflows/outflows over a time period

35
Q

retained earnings description

A

shows accumulated earnings at a point in time

36
Q

examples of cash inflows

A

selling goods or providing services
selling assets
borrowing
receiving cash

37
Q

examples of cash outflows

A

pay operating expenses
purchase assets
repay loans
pay returns on investments to owners

38
Q

3 categories of cash flows

A

Operations (in - sell, out - pay wages, taxes, etc.)
Investments - in - sell assets, out buy assets
Financing - in - borrow, out repay; distributions

39
Q

Articulation

A

relationship between operating statements and balance sheets
Statement of cash flows feeds to cash assets in Balance Sheet
Income statement feeds RE sheet, feeds RE statement in Balance Sheet

40
Q

Four categories of Notes to Financial Statements

A

Summary of significant accounting policie
Additional information about summary totals in financial statements - detailed data feeding a summary
Disclosure of important information not added to financial statements - recognition
Supplementary information required by FASB or SEC

41
Q

Recognition

A

include estimates/judgements in financial statements

42
Q

Disclosure

A

include estimates/judgements in notes

43
Q

financial statement analysis

A

examining relationships among financial statements and trends within

44
Q

common size financial statements

A

using percentages of sales/revenues/assets to compare financial data between companies
- divide all income statement numbers for a given year by sales (or revenues) for the year.

45
Q

Horizontal analysis

A

comparing results from year to year, using absolute values or percentages

46
Q

Vertical analysis

A

comparison to other companies in the same industry at the same point in time
divide all numbers by biggest number, typically revenue for

Accounting D1 96 (6 decks)

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